Market Open(ed) Issue #23

US MINERALS EFFORT

stRIKE HARD, STRIKE FAST

LIONTOWNS DANCE CARD

trump-pet sounds

FROM THE editor

As we approach the holiday season in 2023, Officeworks is subtly reminding us to embrace the festive spirit and leave this year’s difficulties behind. Despite being in the year’s final quarter, many have already resigned themselves to writing off 2023 as a year to forget. In a previous discussion, I mentioned the ominous signs of a global recession, which could be just the beginning of a series of challenging years ahead. However, as my philosophical father used to say, “Every action has an equal and opposite reaction.” What does this mean for the state of the world’s economy?

In the past, a war involving multiple nations has effectively solved problems such as inflation, overproduction, unemployment, and the resetting of economic zones. For example, the stock market crash 1929 led to the worst depression in modern history. Still, eventually, the US and other lucky Western economies prospered in the 1950s with the American dream in hand. The Middle Class became a reality, with manicured gardens, Buicks in the driveway, and American-made appliances, including televisions. However, consumption remained king for the next four decades until the developed world’s leaders could no longer ignore unchecked consumption’s financial and environmental consequences. While I’m not a fan of conspiracy theories, COVID could have easily been the entropic face of the new normal that humanity would have to accept, whether they liked it or not. Returning to my father’s mantra, what is the upside of this downside?

With over 8 billion people on the planet, all wanting the same things like love, water, food, shelter, community, and respect, the world is being forced to find sustainable ways to provide these necessities. This will lead to a significant qualitative shift sooner rather than later. I believe humanity has always stumbled towards a better new normal, more out of necessity than want. Thankfully, technological innovation is making this transition possible, which would have been unthinkable a decade ago. It will require raw materials, which the human race will have to extract sustainably and more fairly than ever before. This new normal can lead to unprecedented prosperity, and for the first time, it doesn’t necessarily need to be driven by the tragedies of global conflict.

Rueben Hale

US HOME EFFORT

By Tom Duggan

Aseries of high-profile pollution incidents had the US mining sector historically labelled as careless, corrupt, and devastating. It led to a passage of landmark preservation laws in the 1970s and an industry offshoring to more welcoming destinations.

But China was ready to grow and, as is the way with any economy undergoing rapid development, had fewer qualms about letting Mother Nature take a few for the team.

Ping-pong diplomacy, lifted embargoes, and a mutual Soviet opponent had the two nations in good standing at the time, but now the winds are

changing fast. The US. finds itself in a precarious position in this transforming world. It must be highly unsettling for the world’s largest economy, to have 30 of its 50 listed critical minerals dominated by a geopolitical enemy.

China has proven its willingness to weaponise supply chains and has restrictions on gallium and germanium already in place. The concerns that China would cut off more mineral resources and put a bottleneck on America’s ability to develop green energy technologies and advanced defence systems are very real.

The US Senate Committee on Energy and Natural

Resources held a hearing late last month with the object of countering the People’s Republic’s control. “Just like Putin weaponized Russia’s oil and gas resources to try to scare off Europe from supporting Ukraine, Xi Jinping and the Chinese Communist Party are more than willing to use critical minerals as leverage to put Americans and the free world at risk,” Democratic Senator Joe Manchin said to open the hearing.

It has become a bipartisan issue, and both Donald Trump and Joe Biden administrations have made policy decisions directed at ramping up production at home, with Trump finalising a rule before leaving office that effective immediately added mining to a list of industries that can receive fast-tracked permitting.

But their actions have been largely unsuccessful.

The U.S. needs the minerals now, the permitting process is already long, and environmental lobbyists have been remarkably successful in blocking developments.

It means what might take two years in Australia or Canada takes 10 on home soil even with approval, and projects like a proposed $1.7 billion nickelcopper-cobalt mine in Minnesota or what is believed to be the world’s richest lithium deposit in the woods of Maine are unlikely to ever see the light of day.

And the Biden Administration has recommended changes to a law from 1872 that, unlike Australia, has the US collecting no royalties on resources extracted from federal lands.

An interagency working group said the changes could pay for boosted mining permits, infrastructure,

and services to mining-dependent communities, but was seen as another deterrent by Republicans and industry groups.

President and CEO of the National Mining Association Rich Nolan said the recommendations did little to advance a stated goal of securing domestic supplies.

“Will throw additional obstacles in the way of responsible domestic projects, forcing the U.S. to double-down on our already outsized import reliance from countries with questionable labour, safety and environmental practices,” he warned.

The top Republican on the US Senate Energy and

Natural Resources panel, Wyoming Senator John Barrasso, was more amplified, saying the actions would take a sledgehammer to affordable reliable energy and force the US to buy even more critical minerals from China and other nations that use forced or child labour.

An offshoring of the US mining industry gave an underhand approval to environmental and labour tactics well beneath domestic standards, but the public was able to tolerate an out of sight and mind approach to mineral resources.

But those resources are now at a fore of global policymaking, and even with an expanded definition

of domestic extending the reach of US capital, it is increasingly apparent that the superpower will need to exploit the immense natural resources buried within its 50 states.

It could take a massive shift in public perception for the US to get the sector back on rails, but with a massive gap between raw materials and demands of the energy transition, the battle for the hearts and minds of mining is one it may need to win.

Barrasso (left) and Carper

Trump Voice too much of a good thing?

The potential of Donald Trump as the US House Speaker could be very real, and while it would certainly be entertaining for a while, apolitical enjoyers of his antics might find it to be too much of a good thing.

But the Republican primaries were a slog without the presumed frontrunner, who still faces no less than 91 criminal charges. There was just something captivating about a golden-haired jerk bullying a bunch of political nerds off the stage. No matter what your political affiliation, it’s hard not to think so many of these US politicians are too damn old. The thought of dying at work is nightmarish, and I should be able to mock politicians at my own whimsy, not fight a compulsive urge to get them a cup of tea and listen to stories about what businesses were on some random street back in the 1950s.

And the old bullies of Europe came to France looking for a grand bargain of an energy deal, who I’m sure got a good chuckle out of its nonnuclear German neighbours. I’m sure if Trump was in charge there, he’d say he would build a new Maginot Line and Germany was going to pay for it. Those two have had slightly worse clashes in the past though, and it’s a direr situation in South Africa, where mining profits have been slashed by nearly half during its troubles. I doubt your average punter on the streets of Jo’burg is sparing a tear for the miners, but those are some tasty tax dollars evaporating away.

I’m sure anyone who hates crypto is continuing to enjoy this whole meltdown with FTX and Sam Bankman-Fried, now on trial for allegedly stealing billions from his customers, something his defence says was just regular activity for a CEO.

It’s pretty funny going back and reading the techindustry puff pieces around people like BankmanFried and Elizabeth Holmes, and I’m sure it can give a snicker to execs who never claimed to be making the world a better place watching their more pious counterparts go down.

There are more important things going on, but one of the many things I like about Australia is our avoidance of talking too much about things that could cause a stir, and that’s a proud tradition I intend on keeping.

STRIKE HARD, STRIKE FAST

By Rueben Hale

Once just a bullish explorer with grand plans for its landholdings in the Perth Gas Basin, Strike Energy has confirmed another transformational finding, with the appraisal of South Erregulla-2 showing even more world-class potential than the foundation SE-1 discovery in early 2022.

Strike Energy (ASX:STX), a company aiming to produce locally sourced, sustainable and low-cost energy, has made significant progress towards achieving what seemed like an impossible feat just four years ago.

Western Australian company Strike has become the top owner of natural gas reserves in the Perth Basin, thanks to its Gas Acceleration Strategy and support from the WA Government. The company’s South Erregulla-2 appraisal well has exceeded expectations and allowed it to expand its ambitions beyond its initial goals. Strike and its joint venture partner Talon Energy are on the threshold of helping fill critical domestic gas shortages for WA in a transformational guaranteed domestic gas offtake deal with gas giant Santos.

Interestingly, this discovery was initially intended for a low-carbon urea development but has turned out to have enormous potential based on the substantial findings from the SE 2 appraisal this week.

This week, Euroz Hartleys provided an encouraging commentary on the prosperous evaluation of the South Erregulla gas field.

The SE-2 well hit a net pay thickness of 16 metres, more significant than the South Erregulla-1 discovery hole at 14m and Beach Energy’s (ASX:BPT) Trigg NW-1 well at 6m.

According to Euroz Hartleys, the SE-2 appraisal is excellent news for Strike, helping to de-risk the entire project and making it much more likely that the 178 petajoules of contingent resources can count as reserves in the Kingia reservoir –a very timely outcome considering Walyering production is looking highly likely to leap from 21 terajoules to 33TJ very soon.

STRIKE’S JOURNEY

March 28, 2018 – Acquisition of block in the Perth Basin

December 21, 2018 – Petrel Energy and Warrego Energy merge

March 7, 2019 – West Erregulla program begins

August 1, 2019 – Wagina Sandstone and High Cliff sandstone of West Erregulla made on the same day

November 11, 2019 – West Erregulla (1,185 billion cubic feet) 2C contingent resource confirmed

December 6, 2021 – Walyering-5 gas discovery

December 15, 2021 – Strike awarded a $2 million grant for Project Haber

February 2, 2022 – Project Haber awarded major project status

February 17, 2022 – South Erregulla-Wagina gas discovery

April 6th, 2022 - Strike and Perth Energy gas offtake agreement

May 19th, 2022 - Strike and Koch Fertilizer offtake agreement

June 7th, 2022 - Mid West Low Carbon Manufacturing Precinct launched

July 28th, 2022 - West Erregulla Reserves upgraded 41%

August 15th, 2022 - FID on Walyering Gas Project

August 29th, 2022 - West Erregulla-3 confirmed a major producer

September 2nd, 2022 - $30M placement

December 7th, 2022 - Strike increases Warrego stakeholding to 19.9%

December 14th, 2022 - Santos Walyering Gas Sales Agreement

September 26th, 2023 - Production begins at Walyering gas field

October 5th, 2023 - Successful Appraisal of South Erregulla

Strike CEO and MD Stuart Nicholls

Variscan go deep at

San Jose

As it looks toward a restart of Spain’s San Jose zinc mine, Variscan Mines (ASX:VAR) has discovered a thick new lens of high-grade zinc with intersections up to 25 per cent. The new lower lens beneath the La Catedral stope further confirms a multilayered deposit holding a number of vertically stacked, laterally extensive and high-grade mineralised lenses. The depths of San Jose remain prospective and drilling results have continued to highlight the potential for significant discoveries.

Haranga hoard anomalies at Sanela

Over 300,000 Haranga Resources (ASX:HAR) shares swapped hands in early trading after the explorer revealed extensive uranium anomalies at the Sanela prospect, extending over a similar twokilometre structural trend similar to its established Saraya deposit. Haranga has just defined a 16,000 pounds inferred resource at 587 parts per million radiometric equivalent triuranium octoxide at Saraya, standing as the smallest anomaly of seven defined to date at its Senegalese exploration permits.

Cooper begin copper-gold sweep

A cluster of Mt Isa East coppergold prospects has allowed Cooper Metals (ASX:CPM) to run the gauntlet over five key targets with a single campaign. All five hold show strong copper anomalism in favourable lithologies and structural settings, with the market responding well to a detailed plan of attack and new rock chip assays of up to 30 per cent copper from historical workings at Raven –results exceeding Cooper’s own expectations.

Nimy massive nickel-copper at Mons

Nimy Resources (ASX:NIM) has announced a substantial intersection of continuous 13 metres of massive nickelcopper sulphides at the first drill hole at the Mons project. The exciting intercepts contain rich mineralisation of pyrrhotite, pentlandite, chalcopyrite and pyrite, now speeding en-route to the lab for confirmation. This is an encouraging sign following the recent identification of two conductive moving loop electromagnetic plates. Nimy’s drilling efforts now focused on Block 3 to test more modelled MLEM plates.

Lithium Universe opens Hatch

Lithium Universe (ASX:LU7) news flow on its bold plans for Canada shows little sign of slowing with the appointment of worldrenowned engineering company Hatch as its Quebec Lithium Processing Hub engineering study manager. The hub project is under the leadership of Dr Jingyuan Liu and Mr John Loxton. Hatch has project delivery experience worldwide and in Quebec. Lithium Universe Chairman Iggy Tan said he was confident the team could replicate past success at the now lithium-carbonate-focused refinery.

Dreadnought ‘s survey breakthrough

Newton’s laws are working for Dreadnought Resources (ASX:DRE). The busy explorer’s gravity survey at its company making Mangaroon project has this week expanded the Gifford Creek Carbonatite strike to 17 kilometres long and 1km wide. The survey will move focus to define areas of deep weathering and potential high-grade residual enrichment. Dreadnought Managing Director Dean Tuck believes this breakthrough will assist in changing the company’s approach to a more effective and efficient targeted exploration.

MarketOpen RADAR

By Amanda Ellis

Liontown’s Kathleen Valley suitors weigh in

Apopular company on people’s radar this year is Liontown Resources and its company-making takeover bid from US lithium giant Albemarle.

Billionaire mining magnate Gina Rinehart has taken a close-to-biggest stake the company and has turned commentator on its Kathleen Valley lithium mine project too.

We take a took at Liontown, its investors and its flagship Kathleen Valley lithium project.

A takeover target

Kathleen Valley lithium mine modeller and developer Liontown Resources (ASX:LTR) has added 120% to its share price this year on becoming a takeover target of a US major. The 17-year-old Western Australian company’s board has accepted a $6.6 billion akeover bid from US lithium giant Albemarle (NYSE:ALB) that values shares at $3 a pop.

Albemarle holds a 4.37% stake in the stock currently trading at the $3 offer price. But Albemarle’s latest bid for Liontown (the first $2.50-a-share bid got kicked to the curb) has been disrupted by WA mining magnate Gina Rinehart.

Rinehart’s privately held Hancock Prospecting has built a 14.67% stake in the company in recent times, attracting concerns about the effect she could have on the mine-making takeover bid.

Only Liontown executive chairman Tim Goyder holds more shares, with a 14.97% stake, although punters have tipped further buy-ins from the Hancock family outfit that may give them a seat at the boardroom table.

Albemarle has been undertaking its due diligence on an exclusive basis for the past month and may report its findings anytime from next Monday.

Project upside

Liontown’s Kathleen Valley lithium project is a tier-1 lithium deposit that has attracted worldwide attention. It has a mineral resource of 156 million tonnes at 1.4% lithium oxide and an ore reserve of 68.5Mt grading 1.34% Li2O.

The project is in an established WA mining region about 60 kilometres north of Leinster and 680 kilometres north-east of Perth.

Mine production is tipped to start in mid2024, to produce 3MT of spodumene

concentrate a year, which would make Liontown and Kathleen Valley one of the biggest lithium producers in the world. Liontown has long-term supply contracts with major lithium users, including Tesla and Ford Motor Company. The manufacturing vehicle customer contracts are likely to provide Liontown with steady income to back its growth plans.

The company hopes to up production to 700 kilotonnes a year spodumene concentrate six years after it hits go at the mine.

When operating the mine is expected to provide more than 250 jobs at the operation, as the company’s revenue brings in taxpayer dollars to the country and royalties to its home state.

Key issues

Albemarle may come back with issues after its due diligence evaluation of Liontown or the Hancock family influence may change

the dynamic forever for executing a mine development plan.

The Hancock family could push for a seat at the boardroom table, which may prove contentious given Hancock past criticism of Kathleen Valley downsides. Among these are “significant execution, operational ramp-up and market risks” and “productivity, design, quantity and schedule risks largely remain(ing) with Liontown.”

Some shareholder now oppose a $3-a-share or near-on takeoffer, writing to the company this week with their concerns. The estimated capital cost for the mine is now 6% pricier at $951 million, attracting criticism and counter-claims the true cost is likely to be in the billion-dollar mark. Next week may prove a turning point for the company’s future. So keep an eye on the radar.